What Are the First-Year Costs That Come with Raising a Baby?

When you feel you’re ready to have a baby, it can be exciting as well as overwhelming. Having a baby means expanding your family, but it also means that you’ll have some logistics to consider. Namely, what about the financial considerations that come with having a child?

There are short- and long-term factors to think about. In the short-term, you’ll have to think about the medical costs related to pregnancy and labor and delivery, as well as maternity and paternity leave from your job. You’ll have initial investments for items such as cribs and other baby accessories. Then, you’ll have to think about health insurance for your new child and childcare when you do return to work.

These first-year costs can add up very quickly, and they require planning and strategizing to manage them effectively.

LendEDU recently surveyed 1,000 parents with a child who was at the time of the research, at least a year-old but not older than three. The goal of the research was to determine what to expect when it comes to raising a child and the costs it requires within the first year of the baby’s life. The survey took place over two days in February 2019 and was conducted by online polling company Pollfish.

The following are highlights of the research.

On Average, a Baby’s First Year Will Cost $13,186

The research indicates that the year-one costs for a new baby amount to an average of $13,186, with a median cost of $6,000. This number represents quite a jump from a 2010 USDA report, that showed the average household would spend $12,000 during the first year of a baby’s life.

  • For around ¼ of the poll respondents, first-year spending for a new baby represented anywhere from 21 to 30 percent of annual income.
  • 13 percent said it was 31 to 40 percent of take-home pay, and eight percent said they had to spend up to 50 percent of their income.
  • Eight percent spent more than half of their annual income on costs related to the baby.

How Is the Total First Year Cost Broken Down?

So, more than $13,000 is quite a bit in a year. What is that spent on? The costs break down in the following way, based on the LendEDU research:

  • Toys, diapers, and gear like strollers was the most expensive category. These costs represented 30 percent of total spending, amounting to $3,965.
  • 28 percent of spending went to food, which was on average $3,692 of the total first-year costs.
  • Next was healthcare, taking up 17 percent of total first-year spending.
  • Childcare accounted for 13 percent of first-year costs for a new baby, and behind that was miscellaneous expenses at 12 percent of the total.

Did Parents Save in Advance?

With such high costs associated with having a baby, did parents plan, save and budget in advance of having a child?

58 percent of people who participated in the survey said they started saving money to prepare, although 42 percent said they didn’t budget ahead-of-time. 52 percent of parents who did say they started budgeting and saving didn’t save enough for all costs.

Many parents also underestimated how much it would really cost. The average parent in the survey expected to spend $9,371 on a newborn, with their estimates being off by more than $3,800.

So what’s the takeaway? Babies are expensive, and it’s important for parents to have an idea of just how expensive and start financially planning and preparing as soon as possible before having a child.

Author of this article is Mike Brown  at  lendedu.com/